France and EU head for a fallout over 2015 budget

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France and EU head for a fallout over 2015 budget

France and EU head for a fallout over 2015 budget
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A clash between Paris and Brussels is on the cards with the EU’s Commission widely expected to reject France’s budget plans for 2015.

France has already warned that it will run a budget deficit well outside strict EU rules. Finance Minister Michel Sapin said last month that his country would run a budget deficit of 4.3% of gross domestic product next year – far from the 3% deficit it had previously pledged.

If France refuses to make changes the credibility of Brussels and its new powers – which give the European Commission the right to demanded changes to proposed budgets – threatens to be seriously undermined.

If big members such as France are able to flout the new rules it will signal that tough budget regimes can only be imposed on the eurozone’s smaller economies, such as Greece and Portugal.

On the eve of the fiscal presentation deadline there was heated debate in the French Assembly over the government’s “no austerity” attitude.

In an attempt to revive the recession-hit economy there has been very little move towards tightening belts and cutting spending.

One concern is that deep cuts could strengthen the far-right National front in a country where anti EU sentiment is growing.

But analysts say major reforms are needed including an opening up competition and a review of the country’s employment laws and its 35-hour working week .

With all eyes on how Brussels will react, credit agency Fitch has placed France’s sovereign rating on negative watch.